Halcon Resources (HK) In A Perilous Reversal

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Halcon Resources ( HK) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Halcon Resources as such a stock due to the following factors:

  • HK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $37.4 million.
  • HK has traded 932,009 shares today.
  • HK is down 3.1% today.
  • HK was up 5.3% yesterday.

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More details on HK:

Halcon Resources Corporation, an independent energy company, is engaged in the acquisition, production, exploration, and development of onshore oil and natural gas properties in the United States. Currently there are 5 analysts that rate Halcon Resources a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Halcon Resources has been 6.2 million shares per day over the past 30 days. Halcon has a market cap of $2.5 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.46 and a short float of 23.1% with 9.64 days to cover. Shares are up 64.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Halcon Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1435.1% when compared to the same quarter one year ago, falling from $5.47 million to -$72.96 million.
  • The debt-to-equity ratio is very high at 2.56 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, HALCON RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The share price of HALCON RESOURCES CORP has not done very well: it is down 6.44% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • HALCON RESOURCES CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, HALCON RESOURCES CORP reported poor results of -$3.11 versus -$1.24 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus -$3.11).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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